Tags: Apache | buying | spree | APA

Apache Buying Spree Seen Boosting Returns

By    |   Monday, 20 February 2012 01:01 PM

Oil and gas producer Apache Corp. (APA) has been on a buying spree expected to boost investor returns in 2012 and beyond. The Houston outfit has spent $16.7 billion snapping up liquid-rich assets worldwide, jacking up future earnings and cash flow.

Apache is the fourth-largest oil and gas company and it operates in seven countries. The United States and Canada account for nearly half of Apache’s production pipeline, along with 70 percent of reserves.

In 2012, Apache paid $2.85 billion to buy Cordillera Energy Partners, doubling its acreage in the highly profitable U.S. Anadarko basin and driving many more years of production. Apache also owns assets in Egypt, Australia, the U.K., Argentina, and Chile.

For the fourth quarter of 2011, Apache reported full-year oil and gas sales of $4.5 billion, up 50 percent from $3 billion in 2010. Adjusted earnings for the fourth quarter came to $1.2 billion, or $2.94 per share.

The Wall Street consensus estimate for the year had been $11.89 per share, compared to $8.46 in 2010. The actual earnings were $11.47 per share. For 2012, the consensus estimate is $12.33.

Valuable acquisitions

Apache’s core strength is regional diversification. Growth is expected to come from valuable new acquisitions in the United States, Egypt and the recent $1.25 billion purchase of North Sea assets from ExxonMobil (XOM).

No surprise, then, that analysts love Apache. Of the 29 followed by Thomson/First Call, 12 have strong buy recommendations and 12 have buys, with only five holds.

Credit Suisse recently initiated coverage on Apache with an outperform rating, citing its major acquisitions and propensity to extract hidden value from capital-starved properties. The price target is $120.

The company next reports on April 30.

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